How do student loans work?
How do student loans work?
When pursuing studies at the university level, most people want to be able to fully concentrate on their studies and reduce their work commitments significantly or entirely. To make this possible, it's necessary to ensure the student's and their family's financial support during the study period. One of the available options is to apply for a student loan.
A student loan is provided to students, partly for living expenses during studies and partly for payment of tuition fees. The Icelandic Student Loan Fund (Menntasjóður námsmanna) distributes loans and handles their collection. The program the student is enrolled in must be approved by the Student Loan Fund, and studies can be either in Iceland or abroad. When applying for a student loan, you can choose to receive it either in full at the end of the semester or monthly. If you choose monthly payments, you need to keep in mind that you must complete all the studies you committed to, so that you don't receive a higher loan amount than you're ultimately entitled to.
How is the loan amount estimated?
When estimating the amount of the living expenses loan, several factors are considered. Full-time study is defined as 30 ECTS credits, and loans are never provided for more credits even if the student is registered for more. If a student is registered for fewer credits, the living expenses loan is reduced proportionally. Students in their own housing or parents who are studying also receive higher living expenses loans. However, income that students earn during their studies can reduce the amount that the Student Loan Fund allocates for living expenses.
To ensure the correct estimation of living expenses and properly recorded academic progress, it's important that students submit all documents to the Student Loan Fund on time. See more details here.
When do loan repayments begin?
During studies, students don't make any repayments on student loans, neither for tuition fees nor living expenses loans. When all studies are completed and there is no desire to continue receiving student loans, the student can choose whether the loan is set up as an indexed or non-indexed loan and whether repayments are income-linked or not.
For students who complete their studies within the time frame expected by the school's structure, it's possible to apply for 30% of the student loan to be registered as a study grant, which doesn't need to be repaid.
Repayments on the loan begin one year after studies are completed and from the last payment of student loans, in accordance with what was agreed upon.
How does a living expenses loan work?
We offer students living expenses loans to bridge the financial gap from the beginning of the semester until the student loan from the Icelandic Student Loan Fund (LÍN) is paid out.
A living expenses loan is provided in the form of an overdraft facility on a special living expenses account. You can transfer money yourself from the account in the Arion app or online banking and thus ration the amount over the semester until the student loan is paid out.
The cost of a living expenses loan is in the form of interest, which is much lower than on regular overdraft facilities. Interest costs are automatically debited from your debit account, and you only pay interest on the portion of the loan that you use. We also lend for interest costs.
No currency risk is created as the loan is in the same currency as the Student Loan Fund estimates.
To apply for a living expenses loan, you must first open a living expenses account at the nearest Arion Bank branch. After that, you can apply for the loan through online banking.
The condition for a living expenses loan is a loan promise from the Icelandic Student Loan Fund.
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